The perfect crime
In a few years' time, technology executives and investors will marvel at the deal Michael Dell and Silver Lake Partners put together to take PC manufacturer Dell (UNKNOWN:UNKNOWN) private. I can't be certain of this, of course, but I think they will end up making out like bandits. The $13.65 per share they are preparing to pay is an insolent offer, yet the acquirers, particularly Michael Dell, are absolutely brazen, which is why I refer to the deal as a "heist." Where is the board, whose duty is to protect shareholders' interests, in all this?
Unfortunately, the company filed proxy materials this morning with the SEC, according to which the board is recommending that shareholders accept the offer when it is put to a vote in July. Admittedly, the counteroffer from hedge fund manager Carl Icahn and Southeastern Asset Management has not been made fully clear; multiple board inquiries regarding the financing of their offer have gone unanswered. However, that does not mean the board is obligated to accept the first fully financed offer it receives.
Why do I write that that $13.65 per share is an insolent offer? Take a look at the 10-year Dell share price graph:
Michael Dell and Silver Lake Partners picked a point at which the shares were essentially at a decade-plus low before swooping in with an offer that represents just a 37% premium to the price prior to the rumor of the deal surfacing (the shares bottomed last November at $8.86; prior to that the bottom was $8.04 on March 9, 2009, but this was the date on which the S&P 500 hit its own low). If you believe that Dell is in terminal decline, that offer is more than acceptable. If, like long-term shareholder Southeastern Asset Management (and me), you believe Dell has a solid franchise beyond just its PC business, the offer is an insult and the board is derelict in protecting the interests of shareholders not named Michael Dell.